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Korea will lower the barriers for new entries in the private equity fund market and widen the scope of equity investment by fund operators to further vitalize the capital market.
Under the PEF liberalization outline released by the Financial Services Commission on Wednesday, the minimum capital a company needs to set up a PEF business will go down from current 2 billion won ($1.84 million) to 1 billion won. Operators will be able to invest in redeemable preference shares and redeemable convertible preference shares on top of common shares, convertible bonds and bonds with warrant.
The easing in eligibility will likely accelerate expansion in the industry, where operators already number 120 as of late September. Thirteen are waiting for the green light from regulators.
Additionally, online-only banks, mutual savings banks and the Korea Post would also be allowed to start selling funds as early as the first half of next year after the fix in the capital market law. K Bank and Kakao Bank, which started operation this year, branched out to insurance products and are readying to add funds to their portfolio.
The mushrooming in the PEF market would demand more consumer prudence, industry experts cautioned. As many as 66, or more than half of PEFs active in Korea, were making losses as of September.
By Hong Jang-won and Kim Hyo-jin
Copyrights Pulse by Maeil Business News Korea. All Rights Reserved.
Source: Pulse by Maeil Business News Korea (Dec. 14, 2017)